The New Gold? Why Water Is the Big Commodity of the 21st Century

Saturday 22 March was World Water Day. On this day, we were supposed to reflect not just on the ubiquity of this precious wet stuff, but on its increasing and potentially alarming scarcity.

Yet it's hard to focus on the latter when the former is so very evident. Water is everywhere. The Earth is a blue planet, the oceans defining its colour to the outer reaches of our Solar System. 60 percent of our bodies are made of the stuff. It is secretly embedded in almost everything we touch.

And giddy with that abundance we humans have been using it with an almost crazed enthusiasm, mining freshwater from our rivers, lakes and reservoirs not just for drinking and washing but to produce food, and power, and goods.

70 percent of the world's water use is for agriculture. Another 15 percent is to produce energy. As the population sky-rockets, so too does our insatiable demand for food and for energy and therefore for water. And, in the background, our steadily warming climate means a steady reduction in the availability of fresh water for many parts of the world.

Add all this together, says the UNDP, and within 15 years almost half the world's population - that's over 3 billion people - will be living in areas of high water stress. Water is already the commodity of the 21st century.

So what do we do both to preserve fresh water, and to dole it out in the best possible way?

Many point towards technological solutions. We can just pump the groundwater from deeper and deeper, or strip out the salt from seawater. But both of these approaches are hugely energy intensive (which is one reason desalinated water is also known as "electricity in a bottle"), and more energy requires...more water.

Good legislation will also be important, but is also potentially full of unintended consequences. The South African Government, determined to redistribute the country's scarce water fairly and effectively, produced a Water Act that has been described as "perfect" legislation. With scientific precision it detailed how every catchment should be operated, and every river run. But, as we discovered while writing a report for Shell and Unilever on global approaches to policy-making around food, water and energy, the trouble was that it was so very precise it was impossible to implement. It is now languishing on the statute books.

Much more successful has been the new trend of putting a sensible price on water's head and letting carefully regulated markets decide how to spread it.

For example, we found that following more than a decade of drought in Australia's Murray-Darling basin, the local government has devised the world's first water trading system, using shifting prices to direct the water where it is truly needed, including, occasionally, back to nature itself.

And an intriguing analysis published earlier this week by the Potsdam Institute for Climate Impact Research has calculated the role that the international trading of food crops has in shifting the balance of freshwater availability. All food requires water, but some agricultural regions are both more efficient and less water stressed than others. So, for example, though it takes 2700 litres of water to produce 1kg of cereal in Morocco, the same 1kg produced in Germany used only 520 litres. The Potsdam researchers showed that trading food between nations was also effectively trading virtual embedded water, and inadvertently led to freshwater savings worth US$2.4 billion in 2005--an unintended consequence that for once is positive.

In an upcoming debate for Intelligence Squared my fellow panelists and I will be talking much more about the interconnectivity of our three most precious resources--food, energy and water. Meanwhile, two of the major lessons are these: first, it has never been more important to see the big picture; if you don't understand the interconnections between all of these major resources, you don't understand any of them. And second, as we figure out how best to distribute them we would do well to remember the potential power of properly regulated market forces. Or as Dhesigen Naidoo, CEO of South Africa's Water Research Commission put it, "I've learned that water doesn't run in the direction of gravity; it runs in the direction of money."

Dr Gabrielle Walker is Chief Scientist of Xynteo

Hear Gabrielle speak on the 31st March at 'Water, Food, Energy, Climate: Smart Solutions for 2050', which is part of series of talks and debates from Intelligence Squared and supported by Shell. Click here to watch the livestream from 6.30pm GMT.